TSX:MEG - Post Discussion
Post by
retiredcf on Oct 11, 2024 9:25am
Scotiabank
Scotiabank analyst Jason Bouvier likes stocks leveraged to heavy oil prices,
“TMX is fully operational and brings structural change to the Canadian oil market, improving transport efficiency, reducing price volatility, and diversifying market access beyond PADDs 2 and 3 to PADD 5 and Asia. We estimate Western Canada will be long pipeline capacity until mid-2027 and there is potential for another 370 mbbl/d [thousand barrels per day] of pipeline optimization opportunities. Q2 WCS [Western Canada Select] differentials have narrowed to $13.55/bbl (down 18% vs the 2021-2023 average), and we expect differentials to remain in the $13-$15/bbl range long-term. MEG, SCR, IPCO, and IMO have the most torque to stronger heavy oil prices … Shareholder returns are in high gear. Assuming $70 WTI over the next 5 years we expect companies to generate 60 per cent of their current market caps in free cash flow. Importantly, several companies including CVE, IMO, SCR, PXT, and MEG are allocating 100 per cent of FCF toward shareholder returns, with others at 50-75 per cent”
Cenovus Energy Inc. and MEG Energy Corp. are the analyst’s top picks.
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